Question: (a) The table below shows the payoff matrix in terms of profit for two stalls, A and B, with two pricing strategies, high price and

(a) The table below shows the payoff matrix in terms of profit for two stalls, A and B, with two pricing strategies, high price and low price.

Stall B

High Price

Low Price

Stall A

High Price

$20m for Stall A

$8.5m for Stall B

$30m for Stall A

$6.5m for Stall B

Low Price

$7.5m for Stall A

$50m for Stall B

$25m for Stall A

$40m for Stall B

Solve for the Nash equilibrium and explain whether this game is a prisoner's dilemma game.

(b) If the game becomes a sequential game where Stall A gets to move first, construct a decision tree diagram and solve the game using roll-back method. Explain your answers.

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